Appeals Court Ruling

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA14-1255

Filed: 6 October 2015

Wake County, No. 13-CVS-6691

CITY OF ASHEVILLE, a municipal corporation, Plaintiff,

v.

STATE OF NORTH CAROLINA and the METROPOLITAN SEWERAGE DISTRICT

OF BUNCOMBE COUNTY, NORTH CAROLINA, Defendants.

Appeal by Defendants from “Memorandum of Decision and Order Re:

Summary Judgment” entered 9 June 2014 by Judge Howard E. Manning, Jr., in

Wake County Superior Court. Heard in the Court of Appeals 3 June 2015.

Parker, Poe, Adams & Bernstein LLP, by Daniel G. Clodfelter, City Attorney for

the City of Asheville, by Robin T. Currin and Robert W. Oast, Jr., Long, Parker,

Warren, Anderson & Payne, P.A., by Robert B. Long, Jr., and Moore & Van

Allen PLLC, by T. Randolph Perkins, for the Plaintiff-Appellee.

Attorney General Roy A. Cooper, III, by Special Deputy Attorney General I.

Faison Hicks, for the Defendant-Appellant.

Cauley Pridgen, P.A., by James P. Cauley, III, and Gabriel Du Sablon, for

Amicus Curiae, the City of Wilson.

Kimberly S. Hibbard and Gregory F. Schwitzgebel, III, for Amicus Curiae, the

North Carolina League of Municipalities.

DILLON, Judge.

The City of Asheville (“Asheville”) commenced this action against the State of

North Carolina, challenging the constitutionality of certain legislation enacted by our

ASHEVILLE V. STATE

Opinion of the Court

- 2 -

General Assembly in 2013. A provision in this legislation requires Asheville to cede

ownership and control of its public water system to another political subdivision. The

trial court entered an order enjoining this involuntary transfer, concluding that the

legislation violated the North Carolina Constitution.

We affirm the trial court’s conclusion that Asheville has standing to challenge

the authority of the General Assembly in this matter. We reverse the court’s

conclusions regarding the legislation’s constitutionality and its injunction and

remand the matter for further proceedings consistent with this opinion.

I. Background

The General Assembly has empowered municipalities to own and operate

public water systems and public sewer systems and to serve customers both inside

and outside of their corporate limits. N.C. Gen. Stat. § 160A-312.

Asheville is a municipality which owns and operates a public water system (the

“Asheville Water System”). Asheville, however, does not operate a public sewer

system. Rather, the public sewer system is owned and operated by a metropolitan

sewerage district (an “MSD”).1 Like a municipality, an MSD is a type of political

subdivision authorized by the General Assembly. N.C. Gen. Stat. § 162-64, et seq.

The relationship between Asheville and its water customers living outside of

its corporate limits has historically been quite litigious, with many disputes resolved

1 This MSD, known as the Metropolitan Sewerage District of Buncombe County, is the nominal

defendant in this action.

ASHEVILLE V. STATE


- 3 -

through legislation from our General Assembly. See Candler v. City of Asheville, 247

N.C. 398, 101 S.E.2d 470 (1958); City of Asheville v. State of North Carolina, 192 N.C.

App. 1, 665 S.E.2d 103 (2008).

In 2013, our General Assembly enacted legislation (the “Water/Sewer Act”)

which withdraws from Asheville the authority to own and operate the Asheville

Water System and transfers the System to the Buncombe County MSD as follows:

The Water/Sewer Act creates a new type of political subdivision known as a

metropolitan water and sewerage district (an “MWSD”), empowered to run both a

public water system and a public sewer system within a defined jurisdiction. An

MWSD may be formed either voluntarily or by operation of law. An MWSD is formed

voluntarily when two or more political subdivisions (e.g., cities and MSD’s) consent to

form an MWSD to consolidate the governance of the public water and sewer systems

in their region. N.C. Gen. Stat. § 162A-85.2.

A provision in the Water/Sewer Act (the “Transfer Provision”) – the provision

which is at the heart of this litigation – allows for the formation of an MWSD by

operation of law. This provision states that the public water system belonging to a

municipality or other political subdivision which meets certain criteria and which

happens to operate in the same county that an MSD operates a public sewer system

must be transferred to that MSD, upon which the MSD converts to an MWSD. See

2013 N.C. Sess. Laws 50, §§ 1(a)-(f), as amended by 2013 N.C. Sess. Laws 388, § 4.

ASHEVILLE V. STATE


- 4 -

Though the Transfer Provision does not expressly reference Asheville by name,

the only public water system which currently meets all of the Transfer Provision’s

criteria for a forced transfer to an MSD is the Asheville Water System.

_______________________________________________________________________

Asheville commenced this action, challenging the legality of the Transfer

Provision on several grounds. The State moved to dismiss, contending that Asheville

lacked standing to challenge the General Assembly’s authority to enact the

legislation. Also, both parties filed cross motions for summary judgment.

Following a hearing, the trial court entered an order recognizing Asheville’s

standing. The trial court enjoined the application of the Transfer Provision,

concluding that it violated our state constitution on three grounds.

The State timely appealed.

II. Standard of Review

As this case involves the interpretation of a state statute and our state

Constitution, our review is de novo. See In re Vogler, 365 N.C. 389, 392, 722 S.E.2d

459, 462 (2012).

III. Asheville’s Standing

The trial court concluded that Asheville has standing to challenge the

authority of the General Assembly to enact the Transfer Provision. We agree.

ASHEVILLE V. STATE


- 5 -

Our Supreme Court has expressly held that “municipalities [have] standing to

test the constitutionality of acts of the General Assembly.” Town of Spruce Pine v.

Avery County, 346 N.C. 787, 790, 488 S.E.2d 144, 146 (1997) (citing City of New Bern

v. New Bern-Craven County Bd. of Educ., 328 N.C. 557, 402 S.E.2d 623 (1991) and

Town of Emerald Isle v. State of N.C., 320 N.C. 640, 360 S.E.2d 756 (1987)).

In challenging Asheville’s standing, the State cites In re Appeal of Martin, 286

N.C. 66, 209 S.E.2d 766 (1974), in which our Supreme Court held that a certain

county lacked standing to challenge the constitutionality of a provision contained in

a particular statute. However, the Court explained in Town of Spruce Pine, supra,

that its holding in Martin was not that political subdivisions lack the authority to

challenge the constitutionality of a statute generally, but rather that a political

subdivision which accepts the benefits of part of a statute lacks standing to challenge

another part of that same statute. Town of Spruce Pine, 346 N.C. at 790, 488 S.E.2d

at 146 (distinguishing Martin). Here, Asheville has standing because it has not

accepted any benefit from the 2013 Water/Sewer Act.

IV. Constitutionality of the Water/Sewer Act

The trial court held that the Transfer Provision was invalid under our North

Carolina Constitution based on three separate grounds:

(1) the Transfer Provision is a “local law” relating to “health,”

“sanitation” and “non-navigable streams,” in violation of Article II,

Section 24;

ASHEVILLE V. STATE


- 6 -

(2) the Transfer Provision violates Asheville’s rights under the “law of

the land” clause found in Article I, Section 19; and

(3) the Transfer Provision constitutes an unlawful taking of Asheville’s

property without just compensation in violation of Article I, Sections

19 and 35.

We disagree and hold that the Transfer Provision does not violate these

constitutional provisions.2

A. The General Assembly has plenary power regarding the political subdivisions in

our State, except as restricted by the state and federal constitutions.

The plenary police power of the State is “vested in and derived from the

people,” N.C. Const. Article I, § 2; and “an act of the people through their

representatives in the legislature is valid unless prohibited by [the State]

Constitution.” State ex rel. Martin v. Preston, 325 N.C. 438, 448-49, 385 S.E.2d 473,

478 (1989) (emphasis added). See also Hart v. State, ___ N.C. ___, ___, 774 S.E.2d

281, 287 (2015) (stating that the North Carolina Constitution “is not a grant of power,

but [rather] a limit on the otherwise plenary police power of the State”); Painter v.

Wake County Bd. of Educ., 288 N.C. 165, 177, 217 S.E.2d 650, 658 (1975) (stating that

“[a]n act of our General Assembly is legal when [the North Carolina] Constitution

contains no prohibition against it”).

2 The trial court refused to rule on a fourth basis in support of the injunction, namely, that the

Transfer Provision unlawfully impairs Asheville’s contractual obligations with its bondholders who

provided financing for its public water system, in violation of Article I, Section 10 of the United States

Constitution; Article I, Section 19 of the North Carolina Constitution; and N.C. Gen. Stat. § 159-93.

However, Asheville has not presented any argument regarding this fourth ground as “an alternative

basis in law for supporting the [injunction],” N.C. R. App. P. 10(c), and, therefore, it is not preserved.

ASHEVILLE V. STATE


- 7 -

The General Assembly’s power includes the authority to organize and regulate

the powers of our State’s municipalities and other political subdivisions. See N.C.

Const. art. VII, §1 (recognizing that the General Assembly has the power to regulate

our towns and cities “except as [] prohibited by [our state] Constitution”). Our

Supreme Court has repeatedly recognized this power. For example, in two cases in

which Asheville was a party, the Court stated that the powers of a municipality “may

be changed, modified, diminished, or enlarged [by the General Assembly, only]

subject to the constitutional limitations,” Candler v. City of Asheville, 247 N.C. 398,

407, 101 S.E.2d 470, 477 (1958), and that the authority accorded a municipality “may

be withdrawn entirely at the will or pleasure of the [General Assembly],” Rhodes v.

Asheville, 230 N.C. 134, 140, 52 S.E.2d 371, 376 (1949). See also In re Ordinance, 296

N.C. 1, 16-17, 249 S.E.2d 698, 707 (1978) (“Municipalities have no inherent powers;

they have only such powers as are delegated to them by [our General Assembly]”);

Highlands v. Hickory, 202 N.C. 167, 168, 162 S.E. 471, 471 (1932) (“[Municipalities]

. . . are the creatures of the legislative will, and are subject to its control”).

Here, the General Assembly has sought to exercise its power over political

subdivisions by enacting the Transfer Provision, which (1) creates a new political

subdivision in Buncombe County (an MWSD), (2) withdraws from Asheville authority

to own and operate a public water system, and (3) transfers Asheville’s water system

to the MWSD, all without Asheville’s consent and without compensation to Asheville.

ASHEVILLE V. STATE


- 8 -

Early last century, our Supreme Court recognized our General Assembly’s

power to withdraw from the City of Charlotte its authority to operate its public water

system and to transfer this system to a new political subdivision:

It is clear that the Legislature may, in aid of municipal

government or for the purpose of discharging any

municipal functions, or for any proper purpose, create

municipal boards and confer upon them such powers and

duties as in its judgment may seem best. . . . The

Legislature has frequently exercised the power conferred

by the Constitution by establishing boards of health in

towns and cities, school boards and such others as may be

deemed wise as additional government agencies. We do not

understand that this power is questioned, or that the title to

the [public water system] purchased by [Charlotte] did not

pass to and vest in the board of water commissioners

established by the act [of the Legislature].

Brockenbrough v. Board of Water Comm’rs., 134 N.C. 1, 17, 46 S.E. 28, 33 (1903). The

Court recognized that the waterworks of a municipality are, in fact, “held in trust for

the use of the city.” Id. at 23, 46 S.E. at 35. Additionally:

There is no prohibition . . . against the creation by the

Legislature of every conceivable description of corporate

authority and to endow them with all the faculties and

attributes of other pre-existing corporate authority. Thus,

for example, there is nothing in the Constitution of this

State to prevent the Legislature from placing the police

department of [a municipality] or its fire department or its

waterworks under the control of an authority which may

be constituted for such purpose.

Brockenbrough, 134 N.C. at 18, 46 S.E. at 33. The Court noted that even the city of

Charlotte, the plaintiff in Brockenbrough, “conced[ed] the power of the Legislature to

ASHEVILLE V. STATE


- 9 -

establish [a separate] board of water commissioners and to transfer to the said board

the [waterworks] property of the city.” Id. at 18, 46 S.E. at 33.

Accordingly, unless prohibited by some provision in the state or federal

constitutions, our General Assembly has the power to create a new political

subdivision, to withdraw from Asheville authority to own and operate a public water

system, and to transfer Asheville’s water system to the new political subdivision.

B. The three constitutional restrictions on the General Assembly’s power cited by

the trial court do not apply to the enactment of the Transfer Provision.

Asheville argues that the trial court correctly concluded that the Transfer

Provision violates our state constitution. In our de novo review of the trial court’s

conclusions, we are guided by the following:

Our courts have the power to declare an act of the General Assembly

unconstitutional. See Hart, ___ N.C. at ___, 774 S.E.2d at 284; Bayard v. Singleton,

1 N.C. 5 (1787).

We must not declare legislation to be unconstitutional unless “the violation is

plain and clear,” Hart, ___ N.C. at ___, 774 S.E.2d at 284 (emphasis added). We are

to “indulge every presumption in favor of [an act’s] constitutionality” and that “all

reasonable doubt will be resolved in favor of its validity.” Painter, 288 N.C. at 177,

217 S.E. at 658.

We are not to be concerned with the “wisdom and expediency” of the legislation,

but whether the General Assembly has the “power” to enact it. In re Denial, 307 N.C.

ASHEVILLE V. STATE


- 10 -

52, 57, 296 S.E.2d 281, 284 (1982). As our Court has recognized in an opinion

authored by Judge (now Chief Justice) Mark Martin, “courts have no authority to

inquire into the motives of the [General Assembly] in the incorporation of [a] political

subdivision[.]” Bethania Town v. City of Winston-Salem, 126 N.C. App. 783, 786, 486

S.E.2d 729, 732 (1997) (emphasis added).

And, finally, the burden in this case rests with Asheville to show beyond a

reasonable doubt that the Transfer Provision violates some constitutional provision.

We now address the three constitutional grounds relied upon by the trial court

in striking down the Transfer Provision.

1. Article II, Section 24 – Prohibition against certain types of local laws.

Asheville argues, and the trial court concluded, that the Transfer Provision

violates Article II, Section 24(1)(a) and (e) of our state constitution, which prevents

the General Assembly from enacting certain types of local laws. We disagree.

Taking effect in 1917, Article II, Section 24 restricts the otherwise plenary

power of our General Assembly to enact so-called “local” laws, by declaring void any

“local” law concerning any of 14 “prohibited subjects” enumerated in that provision.

N.C. Const. art. II, § 24(1)(a)-(n). Therefore, a law violates this constitutional

provision only if it is deemed “local” and if it falls within the ambit of one of the 14

“prohibited subjects.”

ASHEVILLE V. STATE


- 11 -

In the present case, the trial court held that the Transfer Provision is a local

law and that it falls within the ambit of two “prohibited subjects”: Laws “relating to

health [or] sanitation” and laws “relating to non-navigable streams[.]” N.C. Const.

art. II, § 24(1)(a), (e).

Our Supreme Court has stated that a law is either “general” or “local,” but

there is “no exact rule or formula” which can be universally applied to make the

distinction. Williams v. Blue Cross, 357 N.C. 170, 183, 581 S.E.2d 415, 425 (2003).

However, in the present case, we need not reach whether the Transfer Provision

constitutes a “local law.” Rather, we hold that it is not plain and clear and beyond

reasonable doubt that the Transfer Provision falls within the ambit of either

prohibited subject identified by the trial court.

Seven years ago, our Court grappled with this issue in a case involving these

same parties and a constitutional challenge of three statutes regulating the Asheville

Water System. City of Asheville v. State of North Carolina, 192 N.C. App. 1, 665

S.E.2d 103 (2008).

In the 2008 case, Asheville argued that every law which concerns a water or

sewer system “necessarily relate[s] to health and sanitation” within the ambit of

Article II, Section 24(1)(a). City of Asheville, 192 N.C. App. at 32, 665 S.E.2d at 126.

Writing for this Court, our former Chief Judge John Martin rejected Asheville’s

argument, holding that “the mere implication of water or a water system in a

ASHEVILLE V. STATE


- 12 -

legislative enactment does not necessitate a conclusion that it relates to health and

sanitation in violation of the Constitution.” Id. at 37, 665 S.E.2d at 129.

Rather, we concluded that our Supreme Court precedent instructs that a local

law is not deemed to be one “relating to health [or] sanitation” unless (1) the law

plainly “state[s] that its purpose is to regulate [this prohibited subject],” or (2) the

reviewing court is able to determine “that the purpose of the act is to regulate [this

prohibited subject after] careful perusal of the entire act”. Id. at 33, 665 S.E.2d at

126 (quoting Reed v. Howerton, 188 N.C. 39, 44, 123 S.E. 479, 481 (1924)). We noted

that the best indications of the General Assembly’s purpose are “the language of the

statute, the spirit of the act, and what the act seeks to accomplish.” City of Asheville,

192 N.C. App. at 37, 665 S.E.2d at 129 (quoting State ex rel. Comm’r of Ins. v. Rate

Bureau, 300 N.C. 381, 399, 269 S.E.2d 547, 561 (1980)).

Following Reed and our 2008 case, we first look to see if the Water/Sewer Act

expressly states that its purpose is to regulate health or sanitation, and conclude that

it does not. Rather, the Act’s stated purpose is to address concerns regarding the

quality of the service provided to the customers of public water and sewer systems:

Whereas, regional water and sewer systems provide

reliable, cost-effective, high-quality water and sewer

services to a wide range of residential and institutional

customers; and

Whereas, in an effort to ensure that the citizens and

businesses of North Carolina are provided with the highest

quality services, the State recognizes the value of regional

ASHEVILLE V. STATE


- 13 -

solutions for public water and sewer for large public

systems; Now, therefore,

The General Assembly of North Carolina enacts . . . .

2013 N.C. Sess. Laws 50 (emphasis added).

We next peruse the entire Water/Sewer Act to determine whether it is plain

and clear that the Act’s purpose is to regulate health or sanitation. We find that there

are no provisions in the Act which “contemplate[] . . . prioritizing the [Asheville Water

System’s] health or sanitary condition[.]” See City of Asheville, 192 N.C. App. at 36-

37, 665 S.E.2d at 128. In fact, a provision in the Act allows for the “denial or

discontinuance of [water and sewer] service” by an MWSD based on a customer’s non-

payment, see N.C. Gen. Stat. § 162A-85.13(c), which, as in the 2008 case, belies

Asheville’s argument that the purpose of the Act relates to health and sanitation. See

City of Asheville, 192 N.C. App. at 35, 665 S.E.2d at 127. Rather, the provisions in

the Water/Sewer Act appear to prioritize concerns regarding the governance over

water and sewer systems and the quality of the services rendered. See N.C. Gen.

Stat. § 162A-85.1, et seq.

Following this same analysis, we hold that the Water/Sewer Act does not fall

within the ambit of the phrase “relating to non-navigable streams.” The mere

implication in legislation of a public water system which happens to derive water

from a non-navigable stream “does not necessitate a conclusion that [the legislation]

relates to [non-navigable streams] in violation of the Constitution.” City of Asheville,

ASHEVILLE V. STATE


- 14 -

192 N.C. App. at 37, 665 S.E.2d at 129. There is nothing in the Water/Sewer Act

which suggests that its purpose is to address some concern regarding a non-navigable

stream.

Asheville cites five cases from our Supreme Court to argue that the Transfer

Provision is a law “relating to health [or] sanitation,” which we now address:

The most compelling of these case is Drysdale v. Prudden, 195 N.C. 722, 143

S.E. 530 (1928). Drysdale appears to stand for the proposition that an act which

establishes a sanitary district (to provide public water/sewer service) is a local law

and relates to health and sanitation. However, on closer look, the Drysdale Court

only bases its ruling on the fact that the act is a local law – the Court never makes

any determination regarding which of the 14 “prohibited subjects” was implicated by

the act; and, therefore we assume that this issue was not put before the Court.

We read Drysdale in conjunction with Reed, supra. Like Drysdale, Reed is a

1920’s case in which our Supreme Court addresses the constitutionality of a statute

creating sanitary districts. Reed, 188 N.C. at 42, 123 S.E. at 479-80. However, unlike

Drysdale, the Court in Reed held that the act in question, which (ironically) created

sewer districts in Buncombe County, was constitutional. Id. at 45, 123 S.E. at 481-

82. Specifically, the Court addressed the issue of whether the act was one “relating

to health [or] sanitation,” holding that it was not, because the language in the act did

not suggest this to be the act’s purpose, but rather the act merely sought to create

ASHEVILLE V. STATE


- 15 -

political subdivisions through which sanitary sewer service could be provided. Id. at

44, 123 S.E. at 481. The Court then addressed separately the issue of whether the

act was local, though curiously holding that the act was not local because it applied

to the entire county. Id. at 45, 123 S.E. at 481-82.

In any event, both cases provide insight on the issue as to whether a law is

“local” or “general,” and, admittedly, the Court’s conclusion in Drysdale on this issue

is more consistent with recent holdings from that Court, while the conclusion on the

issue reached in Reed – that a law is “general” if it applies throughout one entire

county – appears to be somewhat of an outlier. However, Reed is more instructive

than Drysdale in determining whether an act “relat[es] to health [or] sanitation.” Id.

at 44, 123 S.E. at 481. The Court in Reed takes this issue head-on, while in Drysdale

the Court never addresses the issue. Accordingly, as our Court did in 2008, we follow

Reed on the issue as to whether a law relates to health or sanitation.

The other cases cited by Asheville do not mandate that we reach a contrary

result in the present case. Three of these cases are distinguishable because they deal

with legislation that empowers a political subdivision with authority to enforce health

regulations in a county. See City of New Bern v. Bd. of Educ., 338 N.C. 430, 437-38,

450 S.E.2d 735, 739-40 (1994) (authorizing Craven County to perform building

inspections); Idol v. Street, 233 N.C. 730, 733, 65 S.E.2d 313, 315 (1951) (creating a

city-county board of health in Forsyth County); Sams v. Bd. of County Comm’rs, 217

ASHEVILLE V. STATE


- 16 -

N.C. 284, 285, 7 S.E.2d 540, 541 (1940) (creating a county board of health in Madison

County). In the present case, however, the Transfer Provision does not empower

anyone to enforce health regulations, nor does it impose any health regulations on

the Asheville Water System. Rather, similar to the act at issue in Reed, it merely

creates the political subdivision through which public water and sewer systems may

be provided in Buncombe County. Reed, 188 N.C. at 44, 123 S.E. at 481.

The fifth case cited by Asheville, Lamb v. Bd. of Educ., is also not controlling.

235 N.C. 377, 70 S.E.2d 201 (1952). In Lamb, our Supreme Court declared

unconstitutional an act which imposed a duty on the Randolph County Board of

Education to provide “a sewerage system and an adequate water supply” for its

schools. Id. at 379, 70 S.E.2d at 203. The Court held that this legislation did relate

to health and sanitation because it was clear that “its sole purpose” was to make sure

that school children in Randolph County had access to “healthful conditions” while at

school. Id. The Water/Sewer Act, however, does not require any political subdivision

to continue operating a water or sewer system.

2. Article I, Section 19 – “Law of the Land” Clause/Equal Protection

Asheville argues, and the trial court concluded, that the Transfer Provision

violated the “law of the land” clause contained in Article I, Section 19 because there

is no “rational basis” in treating Asheville differently from other municipalities

ASHEVILLE V. STATE


- 17 -

operating public water systems and because there is no “rational basis” in

transferring Asheville’s water system to another political subdivision. We disagree.

The trial court cites Asbury v. Albemarle, 162 N.C. 247, 78 S.E. 146 (1913), as

authority for its holding. In Asbury, our Supreme Court stated that our General

Assembly “is under the same constitutional restraints that are placed upon it in

respect of private corporations” when exercising power regarding a municipality’s

exercise of a proprietary function. Id. at 253, 78 S.E. at 149. However, we do not

read Asbury as restricting the General Assembly’s authority to withdraw authority

from a political subdivision to engage in a proprietary function, a power recognized

in Article VII, Section 1 and in a number of other Supreme Court decisions. Rather,

Asbury addresses the limitations to the General Assembly’s power to manage certain

aspects of a municipality’s water system, standing for the propositions that (1) the

General Assembly has the authority to empower a municipality to operate a public

water system (or other proprietary endeavor); (2) the General Assembly, however,

cannot compel a municipality to operate a water system (or other proprietary

endeavor); and (3) where a municipality which has been empowered and has decided

to operate a public water system, the General Assembly may regulate but cannot

otherwise “control the exercise of [] discretion by the municipality” in operating the

system. Id. at 255, 78 S.E. at 150.

ASHEVILLE V. STATE


- 18 -

Our holding here is not at odds with Asbury. The Transfer Provision does not

compel Asheville to operate a water system nor does it seek to interfere with

Asheville’s discretion in running a water system. Rather, the General Assembly is

exercising its power to withdraw from Asheville its authority to own and operate a

public water system. See Candler, 247 N.C. at 407, 101 S.E.2d at 477 (recognizing

the General Assembly’s power to “diminish” the powers of a municipality).

Asheville contends, and the trial court agreed, that the General Assembly had

no “rational” basis for singling out Asheville in the Transfer Provision. Assuming

that the Transfer Provision has this effect, we believe that the fact that the General

Assembly irrationally singles out one municipality in legislation merely means that

the legislation is a “local” law; it does not render the legislation unconstitutional, per

se. See City of New Bern v. New Bern-Craven County Bd. of Educ., 338 N.C. 430, 435-

36, 450 S.E.2d 735, 738-39 (holding that a law is local if there is no “rational basis

reasonably related to the objective of the legislation” for singling out the class to

whom the law applies); McIntyre v. Clarkson, 254 N.C. 510, 519, 119 S.E.2d 888, 894

(1961) (establishing the “reasonable classification” method to determine whether a

law is general or local). As previously noted, the General Assembly can enact a local

law concerning municipalities so long as the law does not fall within one of the 14

prohibited subjects enumerated in Article II, Section 24 of our state constitution. See

City of Asheville, 192 N.C. App. at 32, 665 S.E.2d at 126 (sustaining statutes

ASHEVILLE V. STATE


- 19 -

regulating the Asheville Water System though concluding that the singling out of

Asheville was not based on any rational basis).

We are persuaded by decisions from the United States Supreme Court holding

that municipalities do not have Fourteenth Amendment rights concerning acts of the

legislature, Ysursa v. Pocatello Educ. Assoc., 555 U.S. 353, 363 (2009) (holding that

unlike a private corporation, a municipality “has no privileges or immunities under

the federal constitution which it may invoke in opposition to the will of its creator

[the legislature]”), a rule which applies even when legislation affects a municipality’s

exercise of a proprietary function, such as operating a water system. See Trenton v.

New Jersey, 262 U.S. 182, 190-91, 67 L. Ed. 937, 942 (1923) (holding that the

distinction between a municipality acting “as an agent for the State for governmental

purposes and as an organization to care for the local needs in a private or proprietary

capacity . . . furnishes no ground to invoke [the Fourteenth Amendment of the United

States]”); see also Williams v. Baltimore, 289 U.S. 36, 40, 77 L. Ed. 1015, 1020-21

(1933); Rogers v. Brockette, 588 F.2d 1057, 1067-68 (1979) (citing additional United

States Supreme Court authority).

Finally, the trial court concludes that the Transfer Provision violates the “law

of the land” clause because there is no rational basis between the purpose of the Act

(to ensure that citizens and businesses are provided with the highest quality of

services) and requiring the involuntary transfer of the Asheville Water System to an

ASHEVILLE V. STATE


- 20 -

MWSD. The trial court lists reasons why it believes that the Transfer Provision will

not accomplish a legitimate purpose. However, the State suggests a number of

rational bases for the Transfer Provision. For instance, the Transfer Provision was

included to provide better governance of the Asheville Water System, a system which

has had a contentious history with customers residing outside Asheville’s city limits:

The Transfer Provision allows the Asheville Water System to be governed by a

political subdivision whose representatives are selected from all areas served by the

System, as opposed to being governed by Asheville’s city council, which is chosen only

by those living within Asheville’s city limits. It is not our role to second-guess “the

wisdom [or] expediency” of the Transfer Provision, as long as there is some rational

basis in that provision to accomplish some valid public purpose. See In re Denial, 307

N.C at 57, 296 S.E.2d at 284.

Accordingly, we reverse the conclusion of the trial court that the Transfer

Provision violates the “law of the land” clause in our state constitution.

3. Article I, Sections 19 and 35 – Taking of Asheville’s Property

Asheville argues, and the trial court held, that the Transfer Provision exceeded

the State’s authority to take property, or, in the alternative, to take property without

paying just compensation in violation of Article I, Sections 19 and 35 of our state

constitution. We disagree.

ASHEVILLE V. STATE


- 21 -

Article I, Section 19 of our state constitution states that no person shall be

“deprived of . . . property, but by the law of the land,” and Article I, Section 35 states

that “[a] frequent recurrence to fundamental principles is absolutely necessary to

preserve the blessings of liberty.”

The trial court concluded that the Transfer Provision violates the above cited

sections in two respects: First, the Transfer Provision was “not a valid exercise of the

sovereign power of the [General Assembly] to take or condemn property for a public

use” because the transfer of Asheville’s water system to the MSD would not result in

any “change in the existing uses or purposes currently served by the [system]”; and

second, even if the General Assembly had the power to “condemn” Asheville’s water

system, it deprived Asheville of its constitutional right to receive “just compensation.”

On the first issue, we note that our Supreme Court has recognized the

authority of our General Assembly to divest a city of its authority to operate a public

water system and transfer the authority and assets thereof to a different political

subdivision. See Brockenbrough, 134 N.C. at 19, 46 S.E. at 33 (recognizing that the

waterworks of a municipality are, in fact, held “in trust for the use of the city”).

Our United States Supreme Court has held that there is no constitutional

prohibition against a State withdrawing from a municipality the authority to own

and operate a public water system and transferring the municipality’s system to

ASHEVILLE V. STATE


- 22 -

another political subdivision “without compensation” to the municipality or “without

the consent” of the municipality’s citizens:

The diversion of waters from the sources of supply for the

use of the inhabitants of the State is a proper and

legitimate function of the State. This function . . . may be

performed directly [by the State]; or it may be delegated to

bodies politic created for that purpose, or to the

municipalities of the State. . . .

. . . . The State, therefore, at its pleasure may modify or

withdraw all such powers, may take without compensation

such property, hold it itself, or vest it in other agencies. . .

. All this may be done, conditionally or unconditionally,

with or without the consent of the citizens, or even against

their protest.

Trenton v. New Jersey, 262 U.S. at 186, 67 L. Ed. at 940. See also Hunter v.

Pittsburgh, 207 U.S. 161, 178-79, 52 L. Ed. 151, 159-60 (1907). The Trenton Court

specifically addressed that its holding applied even to State action concerning a

municipality acting in a proprietary capacity. Trenton, 262 U.S. at 191, 67 L.E. at

943.

Our holding today is consistent with holdings from around the United States.

As the treatise McQuillan on Municipal Corporations recognizes, “it is generally held

that transferring property and authority by act of the legislature from [a city] to

another where the property is still devoted to its original purpose, does not invade

the vested rights of the city.” McQuillan, sec. 4.133, Vol. 2. Indeed, the Minnesota

Supreme Court has stated:

ASHEVILLE V. STATE


- 23 -

“[a]s to property held in a proprietary or private capacity,

in trust for the benefit of township inhabitants for certain

designated purposes, the legislature may provide for the

transfer thereof from the officers of such municipality to

different trustees, with or without consent of the

municipality and without compensation to it.

Bridgie v. Koochiching, 35 N.W.2d 537, 540 (1948). Likewise, the Pennsylvania

Supreme Court has stated:

The Commonwealth has absolute control over such

agencies and may add to or subtract from the duties to be

performed by them, or may abolish them and take property

with which the duties were performed without

compensating the agency thereof.

Chester County v. Commonwealth, 17 A.2d 212, 216 (1941). See also Orleans Parish

v. New Orleans, 56 So.2d 280, 284; Hickey v. Burke, 69 N.E.2d 33 (1946) (Ohio court

recognizing power to “relieve [a] municipality of [certain] duties and withdraw the

power. If property has been acquired, it may shift the title and control to other

agencies[.] . . . without compensation”).

None of the cases cited by Asheville in its argument address the situation

where the General Assembly acts to take the property of a municipality used to carry

on a proprietary function and transfers it to another political subdivision to carry out

the same function. For instance, State Hwy. Comm’n v. Greensboro Bd. of Educ., 265

N.C. 35, 143 S.E.2d 87 (1965) and Bd. of Transp. v. Charlotte Park & Rec. Comm’n,

38 N.C. App. 708, 248 S.E.2d 909 (1978) merely stand for the proposition that where

one governmental agency charged with building roads condemns the property of

ASHEVILLE V. STATE


- 24 -

another agency who owns property for purposes unrelated to building roads, the

condemning agency must pay just compensation.

Accordingly, we hold that the Transfer Provision does not constitute an

unlawful taking without just compensation.

V. Conclusion

In conclusion:

We affirm the portion of the trial court’s order denying the State’s motion to

dismiss, rejecting the State’s argument that Asheville lacked standing or capacity to

challenge the validity of the Transfer Provision.

We reverse the trial court’s grant of summary judgment for Asheville on its

first claim for relief, which declared that the Transfer Provision constitutes a local

act relating to health, sanitation or non-navigable streams in violation of Article II,

Sections 24(1)(a) and (e) of our state constitution. Specifically, we hold that, assuming

it is a local act, it does not “relate to” health, sanitation, or non-navigable streams

within the meaning of our state constitution. We also reverse the trial court’s denial

of the State’s motion for summary judgment on this claim, and direct the court on

remand to enter summary judgment in favor of the State on this claim.


second claim for relief, which declared that the Transfer Provision violates the “law

of the land” clause in Article I, Section 19 of our state constitution. We also reverse

ASHEVILLE V. STATE


- 25 -

the trial court’s denial of the State’s motion for summary judgment on this claim, and

direct the court on remand to enter summary judgment in favor of the State on this

claim.


third claim for relief, which declared that the Transfer Provision violates Article I,

Sections 19 and 35 of our state constitution, as an invalid exercise of power to take or

condemn property. We also reverse the trial court’s grant of summary judgment on

Asheville’s sixth claim for relief, which, in the alternative to the injunction, awarded

Asheville money damages for the taking of the Asheville Water System. We also

reverse the trial court’s denial of the State’s motion for summary judgment on these

claims, and direct the court on remand to enter summary judgment in favor of the

State on these claims.

We reverse the trial court’s order enjoining the enforcement of the Transfer

Provision.

We do not reach any conclusion regarding Asheville’s fourth and fifth claims

for relief, in which Asheville contends that the enforcement of the Transfer Provision

would impermissibly impair obligations of contract in violation of our state and

federal constitutions and in violation of N.C. Gen. Stat. § 159-93. The trial court

made no rulings on these claims, and Asheville did not take advantage of Rule 10(c)

of our Rules of Appellate Procedure, which allows an appellee to propose issues which

ASHEVILLE V. STATE


- 26 -

form “an alternate basis in law for supporting the order[.]” Therefore, any argument

by Asheville based on these claims for relief are waived.

AFFIRMED IN PART, REVERSED AND REMANDED IN PART.

Judges CALABRIA and ELMORE concur.

Documents

Appeals Court Ruling